Published: Friday, March 21, 2014 at 10:46 p.m.

Last Modified: Friday, March 21, 2014 at 10:46 p.m.

SARASOTA - Bill Isaac thinks about financial panics and economic crashes a good bit, and he is certain that Congress has done nothing to prevent another one from occurring.

As a past chairman of the Federal Deposit Insurance Corp., an agency that has a primary role of avoiding banking calamities, Isaac knows a thing or two about avoiding financial meltdowns on a large scale.

He has even collected several crashes in a book, entitled “Senseless Panic,” which offers postmortem analyses on what brought about economic ebbs of the past several decades.

Isaac maintains that the crash of 2008, for instance, which brought about the Great Recession, was not really any worse than many others. He contends, instead, that it was just handled more poorly than some.

He says the Federal Reserve Board, the White House and Congress managed to make the economic decline worse — and take longer to straighten out — because they collectively lacked a consistent policy to deal with troubled banks.

Some, he notes, were essentially nationalized — rescued and sold to solvent institutions — while others were allowed to go down in flames.

The Fed also erred in announcing that it planned to keep interest rates historically low — and for how long they planned to suppress rates.

“They didn’t have a consistent strategy,” Isaac said Friday, in a speech that was part of business group Argus Foundation’s ongoing “Meet the Minds” series.

Isaac, who also was part of a group that in the mid-2000s proposed developing a $200 million condominium and retail complex downtown known as Pineapple Square, cited specific examples of the impact of a lack of a consistent federal policy.

In March 2008, as part of a bailout engineered by the Federal Reserve and aided by the U.S. Treasury Department, J.P. Morgan Chase & Co. acquired the investment banking firm Bear Stearns.

But when Lehman Bros., another major Wall Street banking firm, needed rescuing, the Fed refused to help finance a plan of assistance. Lehman filed for bankruptcy protection in mid-September, kick-starting the Great Recession in many analysts’ minds.

Even more egregious, to Isaac, one day after Lehman’s filing, Treasury agreed to save insurance giant AIG from insolvency with an $85 billion bailout that came in exchange for significant equity ownership.

“Nobody knew who was going to fail next,” Isaac added. “Nobody knew how the government was going to react.”

Even more ominous for the future, Isaac says he does not see any true reform on the horizon, either.

“Nobody from Congress is willing to fix it,” Isaac said. “You’ve got to take on the Fed.”

Isaac also advocates doing away with Fannie Mae, Freddie Mac and other agencies that encourage, or facilitate, inexpensive home loans.

That also means taking on special interest groups such as the National Association of Home Builders and others, who strongly push for government policies that put as many consumers as possible into their own homes.

“There is quite a coalition that wants to promote housing,” Isaac said.

Some of Isaac’s comments might be controversial, but he is not new to railing against what he considers unnecessary government intervention in the economy.

In the fall of 2008, Isaac spoke out against implementation of the Troubled Asset Relief Program, or TARP, both in Congressional testimony and in a Washington Post editorial.

“The banks do not need taxpayers to carry their loans,” he wrote in the Post. “They need proper accounting and regulator policies that will give them time to work through their problems.”

TARP was defeated in the U.S. House of Representatives in its initial vote, but eventually passed.

Together, TARP and the recession-era policies inspired Isaac to write “Senseless Panic,” which was published in 2010.

“I wrote this book because I was very frustrated,” Isaac told the group Friday.

Isaac served as chairman of the FDIC in the early 1980s, one of the most tumultuous periods in U.S. banking history. Roughly 3,000 banks and thrifts failed during that time, including Continental Illinois Bank and nine of the 10 largest banks in Texas.

Isaac was appointed to the board of the FDIC, at 34, by President Jimmy Carter and became chairman after Ronald Reagan was elected.

After leaving that job in 1985, he created his own consulting group to advise financial institutions. It was acquired by FTI Consulting in 2011.

A Sarasota resident, Isaac is today a senior managing director and global head of financial institutions for FTI.

<p><em>SARASOTA</em> - Bill Isaac thinks about financial panics and economic crashes a good bit, and he is certain that Congress has done nothing to prevent another one from occurring.</p><p>As a past chairman of the Federal Deposit Insurance Corp., an agency that has a primary role of avoiding banking calamities, Isaac knows a thing or two about avoiding financial meltdowns on a large scale.</p><p>He has even collected several crashes in a book, entitled “Senseless Panic,” which offers postmortem analyses on what brought about economic ebbs of the past several decades.</p><p>Isaac maintains that the crash of 2008, for instance, which brought about the Great Recession, was not really any worse than many others. He contends, instead, that it was just handled more poorly than some.</p><p>He says the Federal Reserve Board, the White House and Congress managed to make the economic decline worse — and take longer to straighten out — because they collectively lacked a consistent policy to deal with troubled banks.</p><p>Some, he notes, were essentially nationalized — rescued and sold to solvent institutions — while others were allowed to go down in flames.</p><p>The Fed also erred in announcing that it planned to keep interest rates historically low — and for how long they planned to suppress rates.</p><p>“They didn't have a consistent strategy,” Isaac said Friday, in a speech that was part of business group Argus Foundation's ongoing “Meet the Minds” series. </p><p>Isaac, who also was part of a group that in the mid-2000s proposed developing a $200 million condominium and retail complex downtown known as Pineapple Square, cited specific examples of the impact of a lack of a consistent federal policy.</p><p>In March 2008, as part of a bailout engineered by the Federal Reserve and aided by the U.S. Treasury Department, J.P. Morgan Chase & Co. acquired the investment banking firm Bear Stearns.</p><p>But when Lehman Bros., another major Wall Street banking firm, needed rescuing, the Fed refused to help finance a plan of assistance. Lehman filed for bankruptcy protection in mid-September, kick-starting the Great Recession in many analysts' minds.</p><p>Even more egregious, to Isaac, one day after Lehman's filing, Treasury agreed to save insurance giant AIG from insolvency with an $85 billion bailout that came in exchange for significant equity ownership.</p><p>“Nobody knew who was going to fail next,” Isaac added. “Nobody knew how the government was going to react.”</p><p>Even more ominous for the future, Isaac says he does not see any true reform on the horizon, either.</p><p>“Nobody from Congress is willing to fix it,” Isaac said. “You've got to take on the Fed.”</p><p>Isaac also advocates doing away with Fannie Mae, Freddie Mac and other agencies that encourage, or facilitate, inexpensive home loans.</p><p>That also means taking on special interest groups such as the National Association of Home Builders and others, who strongly push for government policies that put as many consumers as possible into their own homes.</p><p>“There is quite a coalition that wants to promote housing,” Isaac said.</p><p>Some of Isaac's comments might be controversial, but he is not new to railing against what he considers unnecessary government intervention in the economy.</p><p>In the fall of 2008, Isaac spoke out against implementation of the Troubled Asset Relief Program, or TARP, both in Congressional testimony and in a Washington Post editorial.</p><p>“The banks do not need taxpayers to carry their loans,” he wrote in the Post. “They need proper accounting and regulator policies that will give them time to work through their problems.”</p><p>TARP was defeated in the U.S. House of Representatives in its initial vote, but eventually passed. </p><p>Together, TARP and the recession-era policies inspired Isaac to write “Senseless Panic,” which was published in 2010.</p><p>“I wrote this book because I was very frustrated,” Isaac told the group Friday.</p><p>Isaac served as chairman of the FDIC in the early 1980s, one of the most tumultuous periods in U.S. banking history. Roughly 3,000 banks and thrifts failed during that time, including Continental Illinois Bank and nine of the 10 largest banks in Texas. </p><p>Isaac was appointed to the board of the FDIC, at 34, by President Jimmy Carter and became chairman after Ronald Reagan was elected.</p><p>After leaving that job in 1985, he created his own consulting group to advise financial institutions. It was acquired by FTI Consulting in 2011. </p><p>A Sarasota resident, Isaac is today a senior managing director and global head of financial institutions for FTI.</p>